Question
The initial cash outlay and pre-tax cash flow projections are presented below for new equipment that Outdoor Sports, Inc. is evaluating. Outdoor Sports is considering
The initial cash outlay and pre-tax cash flow projections are presented below for new equipment that Outdoor Sports, Inc. is evaluating.
Outdoor Sports is considering manufacturing a new line of laser rangefinders:
| Initial Cash Outlay | $1,000,000 |
|
Annual pre-tax cash inflows at the end of each of Years 1 to 5 |
$350,000 |
|
Salvage value |
$100,000 |
Outdoor Sports uses an after-tax cost of capital of 8 percent per year for discounting purposes.
It depreciates its equipment on a straight-line basis over a period of five years and its tax rate is 25%.
What is the NPV of the project?
| A. | $295,817 | |
| B. | $(422,871) | |
| C. | $116,145 | |
| D. | $727,758 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
The Internal Auditing Pocket Guide
Authors: J. P. Russell
1st Edition
0873895606, 978-0873895606
